Daniel Gil of FundFire Alts discusses First Eagle Investment Management’s planned entry into the listed closed-end fund (CEF) market in his recently published article. The proposed fund, the First Eagle Municipal High Income Fund, is a leveraged municipal bond product aimed at generating tax-exempt income, overseen by portfolio manager John Miller. Miller, a veteran of 27 years at Nuveen, now leads the newly established High Yield Municipal Credit team. The move is notable amid a stagnant IPO market for listed CEFs, with the last listed CEF IPO completed in October 2022.
With tightening discounts in the secondary market, conditions have improved for the launch of a listed CEF IPO. Kim Flynn, President at XA Investments notes, “Municipal bonds are an asset class that often begins the process of reopening a closed market … it’s interesting that Miller at First Eagle may be the first to reopen this space.”
Despite potential demand for tax-exempt income strategies and improving conditions in the secondary market, competition from high-yielding ETFs, interval funds, and other listed CEFs might complicate the launch of a tax-exempt strategy in an elevated interest rate environment.